Securities-based lines of credit and margin loans: how they work and how they compare with a HELOC

A securities-based line of credit (SBLOC) is a non-purpose loan secured by eligible securities (opens in a new tab) in a pledged investment account, so a borrower can draw cash without selling those holdings. The rate is usually variable, often a benchmark such as SOFR (opens in a new tab) plus a spread, and the proceeds generally can't buy or trade securities. A margin loan is different: it is credit inside a brokerage margin account, and it can fund securities purchases. With either one, a drop in collateral value can lead to a call for more collateral or repayment, and then to a sale (opens in a new tab).

How does an SBLOC work, step by step?

The sequence starts with eligibility. The lender, usually a bank affiliated with a brokerage, reviews the account and the securities (opens in a new tab) against its list of eligible collateral. Examples of programs include Charles Schwab Bank's Pledged Asset Line (opens in a new tab), Fidelity's securities-backed line of credit through participating lenders, and Morgan Stanley's Liquidity Access Line (opens in a new tab). Published programs commonly set a minimum line of about $100,000 (opens in a new tab), though each lender's own terms control.

Next, the lender approves a line and pledges the eligible account as security. SBLOC agreements commonly allow borrowing against 50% to 95% of eligible holdings (opens in a new tab), depending on the securities and the portfolio. That percentage is the advance rate, and the borrowed amount divided by the collateral value is the loan-to-value ratio. A concentrated position, a low-priced stock or a thinly traded fund can carry a lower advance rate than a diversified holding, and the lender can set its own eligibility and rates.

After approval, the borrower draws money as needed. Published programs generally charge interest on the amount drawn, not on the unused part of the line (opens in a new tab), and the agreement controls the details such as minimum draws, fees and whether payments are interest-only. While the balance is open, the lender keeps checking collateral value. If the value falls far enough, a maintenance call may require more collateral or repayment, often within two or three days (opens in a new tab). If the borrower doesn't meet the call, the firm can sell securities and keep the proceeds to satisfy it.

What can SBLOC proceeds be used for?

Proceeds can generally fund lawful personal, business, tax, education, real-estate or other expenses (opens in a new tab), but not the purchase or trading of securities. The restriction comes from the way the loan is structured. Regulation U (opens in a new tab) limits purpose credit secured by margin stock to a maximum loan value of 50% of the stock's current market value, and a non-purpose SBLOC is set up so the money isn't used to buy or carry securities.

Provider terms add their own limits. Under Schwab's published terms (opens in a new tab), Pledged Asset Line proceeds may not repay margin loans or be deposited into a brokerage account, and Fidelity's terms (opens in a new tab) prohibit using the line to buy securities. Anyone planning to use a line for a specific purpose, such as a home purchase, taxes or a business expense, can ask the lender to confirm in writing that the use is permitted.

What is a margin loan?

A margin loan is credit extended through a brokerage margin account (opens in a new tab). It can support buying or carrying securities, short selling and, depending on the broker's agreement, other permitted borrowing. The securities in the account are the collateral, and the account stays a regular brokerage account, so trading continues.

Two layers of rules apply. Regulation T generally requires an initial deposit of 50% for new purchases of margin securities (opens in a new tab). After that, FINRA Rule 4210 (opens in a new tab) generally requires maintenance equity of at least 25% of the current market value of long margin securities. Short positions have different requirements, commonly 30% for eligible equity securities (opens in a new tab). The same rule requires firms to set their own margin requirements and to impose substantial additional margin where securities are unusually volatile or hard to liquidate (opens in a new tab).

So the 25% figure is a floor, not the number a given broker uses. Broker house requirements can be stricter (opens in a new tab), and they can change because of volatility, concentration, liquidity or the makeup of the account. A margin call can come from a decline in account equity, a change in house requirements or another account event.

How do an SBLOC and a margin loan differ?

The main differences are where the loan sits, what the money can do and who sets the terms.

Sources: FINRA on SBLOCs (opens in a new tab), Schwab Pledged Asset Line FAQs (opens in a new tab), Fidelity margin requirements (opens in a new tab) and FINRA Rule 4210 (opens in a new tab).

The benefit of an SBLOC is cash from a pledged account without a sale and without the account being used to finance new securities positions. The cost of that structure is that the proceeds are limited in purpose, and the lender can demand more collateral or repayment on its own terms. The benefit of a margin loan is flexibility inside the same account; the cost is that the account's securities are exposed to the broker's margin rules, including changes to them.

What do published rates look like in October 2026?

Rates for these products are published on lender pages and move with benchmarks, so each figure below carries its date and its measure. The table reflects pages checked October 3, 2026, and every rate listed is variable.

These are published term structures, not offers. An SBLOC quoted as SOFR plus a spread and a margin loan quoted as a broker base rate plus a spread aren't directly comparable until the benchmark date, rate type, balance tier, fees, collateral, underwriting and repayment terms line up. The tiers also mean the same product can show very different rates at different balances: Fidelity's margin rate runs from 12.075% at the smallest tier to 7.75% at $1 million or more.

How do these compare with a HELOC and a Bitcoin-backed loan?

A home equity line of credit (HELOC) is secured by a house rather than a portfolio, and a Bitcoin-backed loan is secured by cryptocurrency. The national average HELOC interest rate was 7.29% as of September 30, 2026 (opens in a new tab), according to Bankrate's survey. That survey covers the 10 largest banks and thrifts in 10 large US markets and assumes a $30,000 line, a 700 FICO score and an 80% combined loan-to-value ratio on a primary detached single-family home. That is an average interest rate, not an individual APR or a guaranteed offer.

Bitcoin-backed providers publish their own figures:

• Lantern Finance (opens in a new tab) listed a 10% starting APR for Bitcoin collateral on a page updated June 26, 2026, with a 50% maximum loan-to-value ratio and a 2% upfront fee included in the APR.
• Ledn (opens in a new tab) lists Bitcoin-backed loan APRs starting at 11.9% and declining to 9.25% for loans of $2 million or more, as published October 3, 2026.
• BTCBacked (opens in a new tab) lists a 1.5% platform fee for the loan term and a 5% liquidation fee if one applies, with a 90% loan-to-value threshold.

A lower number on one page doesn't settle which loan costs less. The HELOC figure is a surveyed average, the SBLOC figures are SOFR-plus-spread structures, and the crypto figures are starting or tiered APRs that include or exclude different fees. Collateral, loan size, term, fixed or variable structure, credit underwriting, draw and repayment periods, and liquidation terms all differ. The Bitcoin borrowing series covers how Bitcoin-backed loans work and how crypto loans compare with HELOCs and credit cards.

What can force a sale or add to the cost?

Each benefit above has a mechanism behind it that can work against the borrower.

Falling prices. The cash comes without a sale, but the collateral's value moves with the market, and a drop in pledged securities' value can produce a maintenance call (opens in a new tab), typically with two or three days to add collateral or repay. In a margin account, firms generally may liquidate without contacting the customer first, and the customer generally can't choose which securities are sold (opens in a new tab), unless the agreement or law says otherwise.

Lender demand rights. A line of credit looks flexible, but the structure matters. Under Schwab's Pledged Asset Line terms (opens in a new tab), the bank may demand immediate payment, require more collateral or sell some or all pledged securities without further notice if collateral is insufficient, and it may demand full repayment at any time (opens in a new tab) under the demand-line structure. A sale can happen at an unfavorable price and can create a taxable gain or loss.

Rising rates. A variable rate tied to SOFR or a broker base rate changes as the benchmark changes. Schwab's margin base rate, for example, was 10.00% on October 3, 2026 (opens in a new tab), and Schwab can change it. Published SBLOC APRs are variable (opens in a new tab).

Changing house requirements. Under FINRA Rule 4210 (opens in a new tab), firms can set requirements above the minimum, so a security that supported a certain loan amount one month may support less after the broker reviews volatility or concentration.

Custody and counterparty exposure. Eligible securities and cash missing from a customer account at a failed SIPC-member brokerage are covered up to a combined $500,000 per separate capacity, including a $250,000 cash limit (opens in a new tab). That protection doesn't extend to market losses, a decline in the value of securities or a lender's failure to honor a loan, and it generally leaves out non-security crypto assets and stablecoins. Pledged securities can also be subject to the broker's or bank's security interest under the account agreement. The agreement shows whether the securities stay at a SIPC-member broker, sit with a separate custodian or fall under a bank control agreement, and that is worth asking before signing. Rehypothecation and lender bankruptcy are further custody questions to put to the lender in writing.

Can a spot Bitcoin ETP be pledged?

Not automatically. Direct cryptocurrency held in a crypto account isn't automatically eligible for a margin loan or SBLOC. On Fidelity's platform (opens in a new tab), direct crypto trading happens through Fidelity Crypto, while spot crypto exchange-traded products such as FBTC are held in brokerage accounts; FBTC holds 100% cryptocurrency and isn't subject to the Investment Company Act of 1940.

A spot Bitcoin ETP may be marginable at a particular broker, but the required margin can be specific to the security and the account and is subject to house requirements. The initial Regulation T requirement for new purchases is 50%, and additional house requirements may apply (opens in a new tab). A Schwab Pledged Asset Line (opens in a new tab) generally accepts equities, ETFs, mutual funds, bonds, CDs and cash, and the bank keeps discretion over eligibility and advance rates. So the reader's action is specific: ask the broker for the current symbol-level margin screen and the SBLOC lender for its written eligibility schedule for the exact ticker and account type. Approval of spot Bitcoin ETPs for listing and trading did not endorse Bitcoin or crypto trading platforms (opens in a new tab), and the risks of Bitcoin and crypto-linked products remain.

What are the tax rules?

Loan proceeds are generally not taxable income because the borrower has an obligation to repay (opens in a new tab). The treatment can change if debt is canceled or discharged.

Interest follows the use of the money, not the collateral. Only interest on the portion of debt used for investment purposes is investment interest (opens in a new tab), and margin-account interest on money used to buy taxable securities may be deductible when paid by a cash-method taxpayer. The deduction is limited to net investment income under section 163(d) and calculated on Form 4952 (opens in a new tab), which also tracks carryforwards. Interest on money spent on personal expenses is generally personal interest and isn't deductible under these rules, and interest on money used to produce tax-exempt income generally isn't deductible either.

A forced sale is still a sale. If the securities have gained value since purchase, the sale can create a capital gain; if they have lost value, it can create a capital loss subject to the applicable rules. Basis, holding period, proceeds and the allocation of interest are details for a tax professional.

What should a reader ask before signing?

The documents answer most of these, and the answers belong in writing:

1. Is this a margin loan or a separate SBLOC, and which bank, broker and custodian are involved?
2. Which securities are eligible, and what advance rate and concentration limit apply to each holding?
3. What is the benchmark, the spread, the reset frequency and the APR calculation?
4. What are the minimum line size, minimum draw and fees, including any fee for closing or prepaying the line?
5. What uses of proceeds are prohibited?
6. Is the line committed, or can the lender demand repayment at any time?
7. How is a collateral shortfall calculated, how long is the cure period, and can the borrower add cash instead of securities?
8. Can the lender sell without prior notice, and who chooses which securities are sold?
9. How will interest and any forced sale be reported for tax purposes?
10. What happens to the pledged securities if the bank, broker or custodian becomes insolvent?

For regulator-level questions, FINRA's investor guidance on SBLOCs (opens in a new tab) and SIPC's explanation of what it protects (opens in a new tab) are the places to start. Which state requirements apply to a specific lender and product is a question for that lender or the state regulator.

Frequently asked questions

Can SBLOC proceeds buy stocks?

No. SBLOCs are generally non-purpose loans and can't be used to purchase or trade securities (opens in a new tab). A margin loan is the borrowing product built for that purpose, with the margin rules described above.

Does the borrower pay interest on the whole line?

Published programs generally charge interest on the amount drawn, not the unused portion (opens in a new tab). The agreement controls, and it also lists any fees that apply whether or not the line is used.

Can the lender sell securities without notice?

The agreement may allow it, and firms generally may liquidate without contacting the customer first (opens in a new tab) (FINRA Regulatory Notice 18-24). Reading the liquidation clause before borrowing shows how much time, if any, the lender gives.

Are Bitcoin ETFs automatically eligible collateral?

No. Each broker or bank sets eligibility and margin requirements, and they can include security-specific or house requirements. The exact ticker needs to be checked against the lender's current schedule.

Is margin interest deductible?

Interest used to buy or carry taxable investment property may qualify as investment interest, subject to allocation and the net-investment-income limit (opens in a new tab). Form 4952 is where the deduction is figured.

Where to go next

Readers who want the full sequence for a Bitcoin-collateral loan can follow the Bitcoin borrowing series, which covers how Bitcoin-backed loans work, liquidation, taxes, DeFi versus centralized loans and what to check before using a lender. A tax professional can apply the interest-allocation and forced-sale rules to a specific account, and the lender's written agreement is the document to read against every figure on this page.